Invitation Homes - The Strangest Stock I Know Of

19 Eyl 2023

Invitation Homes INVH presents a fascinating and somewhat enigmatic story within financial markets - especially as a stock that can be traded. I personally, am quite bearish and think its crash would benefit countless home buyers across the country. Let me explain...

Founded by Blackstone, this company has evolved into the largest single-owner entity of homes in the United States. Today, they own over 80,000 single-family and multi-family homes. How did they do this? Invitation Homes took advantage of low-interest rates to amass its portfolio, buying home after home, and using the cash flows from renting those homes, to secure loans to buy even more homes.

As far as I can tell, they own 80,000+ homes that are all dependent on the cash flow from renting those homes out being greater than the costs to service them whether it's repairs, taxes or something else.

In a way, this kind of card game, cards stacking on top of cards, reminds me of the financial crisis. Remove one card and...

For a little more historical context: Invitation Homes has managed to become the fastest-growing entity of single family home purchases that has ever existed. Even more interesting, one can't help but wonder if their acquisitions have, in some way, artificially inflated housing prices in certain areas. Did home prices really rise as much as they did an organic fashion? Or did one single buyer prop up entire markets? And now, their purchases have nearly halted, meaning the buying power in those regions is shrinking dramatically. It's possible that they were cornering the market on themselves!

In essence, Invitation Homes serves as a captivating case study in the intricate dance between the real estate market, financial markets, and now trading/investing. I wonder what kind of implications a home purchaser like this could face if the market were to realize some cracks in its model. What if it was forced write down its book as home prices correct? What if rents drop? What if counties raise their taxes? What if the wear and tear of certain homes exceed their monthly rental costs?

It's on my watchlist as a SHORT, because the company that could be worth $0.00 if the market turns on them faster than is being realized.

No position right now, but watching.